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Senior Housing Properties Trust Announces 2012 Fourth Quarter and Year End Results



  Senior Housing Properties Trust Announces 2012 Fourth Quarter and Year End
  Results

Business Wire

NEWTON, Mass. -- February 15, 2013

Senior Housing Properties Trust (NYSE: SNH) today announced its financial
results for the quarter and year ended December 31, 2012.

Results for the quarter ended December 31, 2012:

Normalized funds from operations, or Normalized FFO, for the quarter ended
December 31, 2012 were $75.5 million, or $0.43 per share. This compares to
Normalized FFO for the quarter ended December, 2011 of $67.9 million, or $0.42
per share.

Net income was $44.6 million, or $0.25 per share, for the quarter ended
December 31, 2012, compared to net income of $38.6 million, or $0.24 per
share, for the quarter ended December 31, 2011. Net income for the quarter
ended December 31, 2012 includes a gain on lease terminations of approximately
$479,000, or less than $0.01 per share, related to our agreement with
subsidiaries of Sunrise Senior Living, Inc., or Sunrise, to terminate early
our leases of 10 senior living communities that were scheduled to expire in
December 2013. Net income for the quarter ended December 31, 2011 includes a
non-cash impairment of assets charge of $796,000, or less than $0.01 per
share, related to one property then being offered for sale.

The weighted average number of common shares outstanding totaled 176.6 million
and 160.9 million for the quarters ended December 31, 2012 and 2011,
respectively.

A reconciliation of net income determined according to U.S. generally accepted
accounting principles, or GAAP, to funds from operations, or FFO, and
Normalized FFO for the quarters ended December 31, 2012 and 2011 appears later
in this press release.

Results for the year ended December 31, 2012:

Normalized FFO for the year ended December 31, 2012 were $295.9 million, or
$1.75 per share. This compares to Normalized FFO for the year ended December
31, 2011 of $258.0 million, or $1.73 per share.

Net income was $135.9 million, or $0.80 per share, for the year ended December
31, 2012, compared to net income of $151.4 million, or $1.01 per share, for
the year ended December 31, 2011. Net income for the year ended December 31,
2012 includes a loss on early extinguishment of debt of $6.3 million, or $0.04
per share, related to the prepayment of a portion of the outstanding principal
balance of our Federal National Mortgage Association, or FNMA, secured term
loan, a non-cash impairment of assets charge of approximately $3.1 million, or
$0.02 per share, related to one property, a gain on lease terminations of
approximately $375,000, or less than $0.01 per share, related to our agreement
with Sunrise to terminate early our leases of 10 senior living communities
that were scheduled to expire in December 2013, and a loss on sale of
properties of approximately $101,000, or less than $0.01 per share, related to
the sale of one property in July 2012. Net income for the year ended December
31, 2011 includes a gain on sale of properties of approximately $21.3 million,
or $0.14 per share, related to the sale of seven properties in the second
quarter of 2011, non-cash impairment of assets charges of approximately $2.0
million, or $0.01 per share, related to four properties and a loss on early
extinguishment of debt of approximately $427,000, or less than $0.01 per
share, in connection with replacing our revolving credit facility in June
2011.

The weighted average number of common shares outstanding totaled 169.2 million
and 149.6 million for the years ended December 31, 2012 and 2011,
respectively.

A reconciliation of net income determined according to GAAP to FFO and
Normalized FFO for the years ended December 31, 2012 and 2011 appears later in
this press release.

Recent Investment and Sales Activities:

Since October 1, 2012, we have acquired 11 properties for total purchase
prices of approximately $145.2 million, including the assumption of
approximately $21.9 million of mortgage debt and excluding closing costs:

  * In November 2012, we acquired a previously disclosed property leased to
    medical providers, medical related businesses, clinics and biotech
    laboratory tenants, or an MOB, with 33,796 square feet located in
    Tennessee for approximately $9.2 million, excluding closing costs. Upon
    acquisition, this property was 100% leased to six tenants for weighted (by
    rents) average lease terms of 6.0 years.
  * In December 2012, we acquired a previously disclosed senior living
    community located in Tennessee with 90 living units for approximately
    $11.5 million, excluding closing costs. All the residents at this
    community currently pay for occupancy and services with private resources.
    A subsidiary of Five Star Quality Care, Inc., which together with its
    subsidiaries we refer to as Five Star, manages this community for our
    taxable REIT subsidiary, or TRS, pursuant to a long term management
    agreement.
  * In December 2012, we acquired a senior living community located in Texas
    with 78 living units for approximately $9.0 million, excluding closing
    costs. All the residents at this community currently pay for occupancy and
    services with private resources. Five Star manages this community for our
    TRS pursuant to a long term management agreement.
  * In December 2012, we acquired a previously disclosed MOB with 76,637
    square feet located in Minnesota for approximately $15.1 million,
    including the assumption of approximately $9.6 million of mortgage debt
    and excluding closing costs. Upon acquisition, this property was 100%
    leased to 10 tenants for weighted (by rents) average lease terms of 7.8
    years.
  * In December 2012, we acquired two MOBs with a total of 62,418 square feet
    located in Colorado for a combined purchase price of approximately $16.4
    million, excluding closing costs. Upon acquisition, these properties were
    96% leased to 10 tenants for weighted (by rents) average lease terms of
    5.7 years.
  * In December 2012, we acquired two MOBs with a total of 80,216 square feet
    located in Texas for a combined purchase price of approximately $23.6
    million, excluding closing costs. Upon acquisition, these properties were
    91.7% leased to 16 tenants for weighted (by rents) average lease terms of
    5.2 years.
  * In January 2013, we acquired a previously disclosed senior living
    community located in Washington State with 150 living units for
    approximately $22.4 million, including the assumption of approximately
    $12.3 million of mortgage debt and excluding closing costs. All the
    residents at this community currently pay for occupancy and services with
    private resources. We leased this property to subsidiaries of Stellar
    Senior Living, LLC, a privately owned senior living operating company.
  * In February 2013, we acquired two MOBs with a total of 144,900 square feet
    located in Washington State for a combined purchase price of approximately
    $38.0 million, excluding closing costs. Upon acquisition, these properties
    were 100% leased to Seattle Genetics, Inc. for 5.4 years.

In January 2013, we entered into an agreement to acquire one MOB for
approximately $14.6 million, excluding closing costs. The MOB is located in
Mississippi and includes 71,824 square feet. The closing of this acquisition
is contingent upon completion of our diligence and other customary closing
conditions; accordingly, we can provide no assurance that we will purchase
this property.

We are also currently marketing for sale a senior living community located in
Pennsylvania which we classified as held for sale as of December 31, 2012.

In December 2012, we terminated a previously disclosed agreement to acquire a
senior living community located in Mississippi with 197 living units for
approximately $25.2 million. We terminated this agreement based upon our
diligence findings.

Other Recent Developments:

In May 2012, we entered into an operations transfer agreement, or the
Operations Transfer Agreement, with Sunrise and Five Star related to 10 senior
living communities that we were then leasing to Sunrise. The Operations
Transfer Agreement provides that we and Sunrise would accelerate the December
31, 2013 termination date of these Sunrise leases, that we would lease the 10
communities to our TRS and that Five Star would manage the communities
pursuant to long term management agreements. The leases for all of the 10
senior living communities were terminated prior to December 31, 2012. We have
now entered into management agreements with Five Star with respect to all 10
of these communities.

Recent Financing Activities:

In October 2012, we repaid a mortgage loan encumbering one of our properties
that had a principal balance of $4.2 million, an interest rate of 6.5% and a
maturity date in January 2013.

In January 2013, we issued 11,500,000 common shares in a public offering,
raising gross proceeds of approximately $273.7 million, before underwriting
discounts and expenses. We used the net proceeds (approximately $262.1
million) of this offering to repay borrowings outstanding under our revolving
credit facility and for general business purposes, including funding in part
acquisitions of properties described above and possible future acquisitions.

Conference Call:

On Friday, February 15, 2013, at 1:00 p.m. Eastern Time, David J. Hegarty,
President and Chief Operating Officer, and Richard A. Doyle, Treasurer and
Chief Financial Officer, will host a conference call to discuss the financial
results for the quarter and year ended December 31, 2012. The conference call
telephone number is (800) 553-0288. Participants calling from outside the
United States and Canada should dial (612) 332-0530. No pass code is necessary
to access the call from either number. Participants should dial in about 15
minutes prior to the scheduled start of the call. A replay of the conference
call will be available through 11:59 p.m. Eastern Time, Friday, February 22,
2013. To hear the replay, dial (320) 365-3844. The replay pass code is:
279891.

A live audio web cast of the conference call will also be available in listen
only mode on the SNH website at www.snhreit.com. Participants wanting to
access the webcast should visit the website about five minutes before the
call. The archived webcast will be available for replay on the SNH website for
about one week after the call. The recording and retransmission in any way of
SNH’s fourth quarter conference call is strictly prohibited without the prior
written consent of SNH.

Supplemental Data:

A copy of SNH’s Fourth Quarter 2012 Supplemental Operating and Financial Data
is available for download from the SNH website, www.snhreit.com. SNH’s website
is not incorporated as part of this press release.

SNH is a real estate investment trust, or REIT, that owned 392 properties
located in 40 states and Washington, D.C. as of December 31, 2012. SNH is
headquartered in Newton, MA.

Please see the pages attached hereto for a more detailed statement of our
operating results and financial condition.

                WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 AND OTHER SECURITIES LAWS. ALSO, WHENEVER WE USE WORDS SUCH AS
“BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE” OR SIMILAR
EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING
STATEMENTS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT
FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR.
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY
THESE FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:

  * THIS PRESS RELEASE STATES THAT WE HAVE ENTERED INTO AN AGREEMENT TO
    ACQUIRE A MOB. THIS TRANSACTION IS SUBJECT TO VARIOUS TERMS AND CONDITIONS
    TYPICAL OF COMMERCIAL REAL ESTATE TRANSACTIONS. THESE TERMS AND CONDITIONS
    MAY NOT BE MET. AS A RESULT, THIS TRANSACTION MAY NOT OCCUR OR MAY BE
    DELAYED OR ITS TERMS MAY CHANGE; AND
  * THIS PRESS RELEASE STATES THAT WE HAVE ONE PROPERTY CLASSIFIED AS HELD FOR
    SALE. WE MAY NOT BE ABLE TO SELL THIS PROPERTY ON TERMS ACCEPTABLE TO US
    OR OTHERWISE.

THE INFORMATION CONTAINED IN OUR FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION, OR SEC, INCLUDING UNDER THE CAPTION “RISK FACTORS” IN OUR PERIODIC
REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER IMPORTANT FACTORS THAT
COULD CAUSE DIFFERENCES FROM OUR FORWARD LOOKING STATEMENTS. OUR FILINGS WITH
THE SEC ARE AVAILABLE ON THE SEC’S WEBSITE AT WWW.SEC.GOV.

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON OUR FORWARD LOOKING STATEMENTS.

EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR CHANGE ANY FORWARD
LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

 
Financial Information
(amounts appearing in the table below are in thousands, except per share data)
(unaudited)
 
Income Statement:
                             Quarter Ended             Year Ended
                             December 31,              December 31,
                             2012         2011         2012         2011
                                                                     
Revenues:
Rental income                $124,039     $120,327     $460,811     $422,166
Residents fees and           70,125       16,276       184,031      27,851    
services
Total revenues               194,164      136,603      644,842      450,017
                                                                     
Expenses:
Depreciation                 36,969       31,145       141,456      113,265
Property operating           73,388       27,079       201,263      68,967
expenses
General and administrative   7,411        6,528        31,517       26,041
Acquisition related costs    2,580        5,692        9,394        12,239
Impairment of assets         -            796          3,071        1,990     
Total expenses               120,348      71,240       386,701      222,502   
                                                                     
Operating income             73,816       65,363       258,141      227,515
                                                                     
Interest and other income    160          581          1,117        1,451
Interest expense             (29,814  )   (27,425  )   (117,240 )   (98,262  )
Loss on early
extinguishment of debt       -            -            (6,349   )   (427     )
^(1)
Gain on lease terminations   479          -            375          -
^(2)
(Loss) gain on sale of       -            -            (101     )   21,315
properties ^(3)
Equity in earnings of an     80           28           316          139       
investee
Income before income tax     44,721       38,547       136,259      151,731
expense
Income tax (expense)         (85      )   52           (375     )   (312     )
benefit
Net income                   $44,636      $38,599      $135,884     $151,419  
                                                                     
Weighted average shares      176,554      160,946      169,176      149,577   
outstanding
                                                                     
Net income per share         $0.25        $0.24        $0.80        $1.01     
                                                                              

(1) In August 2012, we prepaid approximately $199.2 million of the outstanding
principal balance of our FNMA secured term loan. As a result of this
prepayment, we recorded a loss on early extinguishment of debt of
approximately $6.3 million consisting of a debt prepayment premium, legal fees
and the write off of unamortized deferred financing fees. In June 2011, we
recorded a loss on early extinguishment of debt of approximately $427,000 in
connection with replacing our revolving credit facility.

(2) In May 2012, we entered an agreement with Sunrise for early terminations
of leases for 10 senior living communities which were previously scheduled to
terminate on December 31, 2013; the leases for all of the 10 communities were
terminated prior to December 31, 2012, and resulted in a gain on lease
terminations.

(3) In July 2012, we sold one MOB for approximately $1.1 million and
recognized a loss on sale of approximately $101,000. During the second quarter
of 2011, we sold seven properties for total sales prices of approximately
$39.5 million and recognized a gain on sale of approximately $21.3 million.

 
Financial Information (continued)
(dollars appearing in the table below are in thousands)
(unaudited)
 
Balance Sheet:
                                   At December 31, 2012   At December 31, 2011
Assets
Real estate properties             $5,183,307             $4,721,591
Less accumulated depreciation      750,903                630,261
                                   4,432,404              4,091,330
Cash and cash equivalents          42,382                 23,560
Restricted cash                    9,432                  7,128
Deferred financing fees, net       29,410                 25,434
Acquired real estate leases and    115,837                100,235
other intangible assets, net
Loan receivable ^(1)               -                      38,000
Other assets                       118,537                97,361
Total assets                       $4,748,002             $4,383,048
                                                           
Commitments and Contingencies
                                                           
Liabilities and Shareholders’
Equity
Unsecured revolving credit         $190,000               $ -
facility
Senior unsecured notes, net of     1,092,053              965,770
discount
Secured debt and capital leases    724,477                861,615
Accrued interest                   15,757                 22,281
Assumed real estate lease          13,692                 17,778
obligations, net
Other liabilities                  65,455                 42,998
Total liabilities                  2,101,434              1,910,442
Shareholders’ equity               2,646,568              2,472,606
Total liabilities and              $4,748,002             $4,383,048
shareholders’ equity
                                                           

(1) In May 2011, we entered a Bridge Loan agreement with Five Star under which
we agreed to lend Five Star up to $80.0 million to fund a portion of Five
Star’s purchase of a portfolio of six senior living communities. As of
December 31, 2011, Five Star had repaid $42.0 million, and in April 2012, Five
Star repaid the $38.0 million which was then outstanding under this Bridge
Loan, resulting in the termination of the Bridge Loan.

 
Funds from Operations and Normalized Funds from Operations
(amounts appearing in the table below are in thousands, except per share data)
(unaudited)
 
Calculation of Funds from Operations (FFO) and Normalized FFO ^ (1):
 
                               Quarter Ended           Year Ended
                               December 31,            December 31,
                               2012        2011        2012         2011
Net income                     $44,636     $38,599     $135,884     $151,419
Depreciation expense           36,969      31,145      141,456      113,265
Loss (gain) on sale of         -           -           101          (21,315  )
properties ^(2)
Impairment of assets           -           796         3,071        1,990     
FFO                            81,605      70,540      280,512      245,359
Acquisition related costs      2,580       5,692       9,394        12,239
Loss on early extinguishment   -           -           6,349        427
of debt ^(3)
Gain on lease terminations     (479    )   -           (375     )   -
^(4)
Percentage rent ^(5)           (8,200  )   (8,300  )   -            -         
Normalized FFO                 $75,506     $67,932     $295,880     $258,025  
                                                                     
Weighted average shares        176,554     160,946     169,176      149,577   
outstanding
                                                                     
FFO per share                  $0.46       $0.44       $1.66        $1.64     
Normalized FFO per share       $0.43       $0.42       $1.75        $1.73     
Distributions declared per     $0.39       $0.38       $1.54        $1.50     
share
                                                                              

(1) We calculate FFO and Normalized FFO as shown above. FFO is calculated on
the basis defined by The National Association of Real Estate Investment
Trusts, or NAREIT, which is net income, calculated in accordance with GAAP,
excluding any gain or loss on sale of properties and impairment of real estate
assets, plus real estate depreciation and amortization, as well as other
adjustments currently not applicable to us. Our calculation of Normalized FFO
differs from NAREIT’s definition of FFO because we include estimated
percentage rent in the period to which we estimate that it relates rather than
when it is recognized as income in accordance with GAAP and exclude
acquisition related costs, loss on early extinguishment of debt, gain on lease
terminations and loss on impairment of intangible assets, if any. We consider
FFO and Normalized FFO to be appropriate measures of operating performance for
a REIT, along with net income, operating income and cash flow from operating
activities. We believe that FFO and Normalized FFO provide useful information
to investors because by excluding the effects of certain historical amounts,
such as depreciation expense, FFO and Normalized FFO may facilitate a
comparison of our operating performance between periods. FFO and Normalized
FFO are among the factors considered by our Board of Trustees when determining
the amount of distributions to our shareholders. Other factors include, but
are not limited to, requirements to maintain our status as a REIT, limitations
in our revolving credit facility agreement and public debt covenants, the
availability of debt and equity capital to us, our expectation of our future
capital requirements and operating performance and our expected needs and
availability of cash to pay our obligations. FFO and Normalized FFO do not
represent cash generated by operating activities in accordance with GAAP and
should not be considered as alternatives to net income, operating income or
cash flow from operating activities, determined in accordance with GAAP, or as
indicators of our financial performance or liquidity, nor are these measures
necessarily indicative of sufficient cash flow to fund all of our needs. We
believe that FFO and Normalized FFO may facilitate an understanding of our
historical operating results. These measures should be considered in
conjunction with net income, operating income and cash flow from operating
activities as presented in our Consolidated Statements of Income and
Comprehensive Income and Consolidated Statements of Cash Flows. Other REITs
and real estate companies may calculate FFO and Normalized FFO differently
than we do.

(2) In July 2012, we sold one MOB for approximately $1.1 million and
recognized a loss on sale of approximately $101,000. During the second quarter
of 2011, we sold seven properties for total sales prices of approximately
$39.5 million and recognized a gain on sale of approximately $21.3 million.

(3) In August 2012, we prepaid approximately $199.2 million of the outstanding
principal balance of our FNMA secured term loan. As a result of this
prepayment, we recorded a loss on early extinguishment of debt of
approximately $6.3 million consisting of a debt prepayment premium, legal fees
and the write off of unamortized deferred financing fees.

(4) In May 2012, we entered an agreement with Sunrise for early terminations
of leases for 10 senior living communities which were previously scheduled to
terminate on December 31, 2013; the leases for all of the 10 communities were
terminated prior to December 31, 2012, and resulted in a gain on lease
terminations.

(5) In calculating net income in accordance with GAAP, we recognize percentage
rental income received for the first, second and third quarters in the fourth
quarter, which is when all contingencies are met and the income is earned.
Although we defer recognition of this revenue until the fourth quarter for
purposes of calculating net income, we include estimated amounts of percentage
rent in our calculation of Normalized FFO for each quarter of the year, and
the fourth quarter Normalized FFO calculation excludes the amounts included
during the first three quarters. During the fourth quarters of 2012 and 2011,
we recognized $10.5 million and $11.3 million of percentage rent for the years
ended December 31, 2012 and 2011, respectively. During the third quarter of
2012, we recognized $350,000 of percentage rent as a result of the September
1, 2012 lease terminations of three senior living communities formerly leased
to Sunrise.

A Maryland Real Estate Investment Trust with transferable shares of beneficial
               interest listed on the New York Stock Exchange.
    No shareholder, Trustee or officer is personally liable for any act or
                           obligation of the Trust.

Contact:

Senior Housing Properties Trust
Timothy A. Bonang, 617-796-8234
Vice President, Investor Relations
or
Elisabeth Heiss, 617-796-8234
Manager, Investor Relations
www.snhreit.com
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